Don’t lax, pay your tax

Momeys.. Bet your lists are going berserk with holiday season approaching. For a lot of us, travel would be on cards. A flurry of hosting to playing guests at weddings & parties will take up time. Add to that the pressure of turning out your best – a few salon visits & shopping trips – there goes any possible free time out of the window. But no one’s complaining. After all December is a time we all love waiting for.

Now having looked at literally the brighter side 😊, this post is to remind about the money that shouldn’t fall prey to taxes. We have seen from very close quarters, fellow momeys have heavily procrastinated, only to loose money to tax.

November-December can be busy time but it shouldn’t come at the cost of tax planning. For those in mid to high tax brackets, this is a great time to take stock. Here are simple steps to approach tax planning:

1. Calculate your year’s taxable income. For eg. If you have rental or interest income in addition, add it to your salary.

2. Determine your tax bracket

3. Check if you have any deductible investments like Home loan payments, life insurance, PF contribution, PPF etc. Under 80C, you can get tax deduction upto 1.5 lacs.

4. Check for any shortfall in the deduction limit of 1.5lacs. If the tax free investments are not totalling to 1.5 lacs, you need a tax plan.

5. Revisit your financial goals. If your money requirement will be soon, you will have to look at lesser tenure options.

6. You believe in No risk – No gain? Momeys if you want utmost safety of your capital, choose safe fixed income options like PPF or FD. If minor volatility doesn’t bother you, you can take some risks with market linked options like NSC, ELSS.

7. If youYou want higher returns, then zero down on NSC or ELSS. (ELSS would be our choice)

8. Save your investment proofs in a folder. While filing taxes, you will need the proofs handy so ensure you keep them easily locatable.

9. Invest because today is the best day. The sooner you finish tax planning and have your choices ready, go ahead and make a purchase. Often delay in investing leaves you in lurch when employer’s HR asks for proofs. For lack of proof, they deduct tax from salaries. You could totally avoid such rude shocks.
In the end, all we can say that is every money cautious person is taking stock of their tax liabilities ahead of the spending season . Are you too momey?

The Corporate Mom

Hello Moms! This is our part 2 in the Millennial Mom series. I am sure you recall our first one was The Media Mom.

To get started, I remember a discussion that dates back in time when I was a salaried employee. I was discussing my tax plan or rather the lack of it with another female colleague. I thought I was in pits as far as my investments were concerned, but to my utter surprise, my friend said that she has never made a single investment on her own. “There is something done by her husband on CA’s advice”, were her words. At that point, we were joined by another team mate and a senior, and the all women’s team shared their investments. A 5 year FD and real estate respectively were spoken of as their investments. But when asked, why these instruments, for what time horizon, what would be their future money requirements be like, these questions drew a blank. 

Now, Moms let me profile these women. Working millennial moms, married to high pressure jobs, over worked most of the times, all very well paid. Academically, management degree holders, fitness lovers, keen readers, well turned out, well travelled, conscious eaters and aware parents. Wouldn’t you expect them to be on top of their finances? But here’s the truth, they may have been HNIs along with their spouses but they were clueless about wealth creation.
Just like my colleagues, there are many millennial moms who have high disposable incomes but lack of awareness, interest and time add up to their financial ignorance. 
So there! We are sharing investments that the uninitiated can consider. These are overall recommendations which can aid in wealth generation and tax planning. However we do encourage our Corporate Mom to take help of a professional financial planner.

Emergency Fund: This is a critical element that we all must pay heed to. All the planning may go for a toss if we don’t keep an accessible emergency fund. Keeping all the money invested with a long term view may not be the best idea since exigencies can come down as a hard reality.

You should consider your 3 to 6 months expenses in emergency fund. If you are savvy about growing your money, then you can park the emergency funds in short term debt funds.

ELSS Funds: Equity Linked savings schemes are an ideal tax saving tool which can give better returns than traditional tax saving schemes. These are essentially tax saving mutual funds that come with a 3 year lock-in.

PPF: For those who are risk averse can invest in PPF for its tax efficiency but declining interest rates are definitely playing dampener on the returns. Plus a 15 year lock-in is a long enough horizon to get above-moderate returns from market linked products.

Mutual Funds: The equity markets have been climbing charts for the last few years. MFs have also been doing well therefore. Since MFs are professionally managed by a team of experts, they can be the best vehicle for working people. You don’t have to monitor market movements everyday basis. 

New investors with a long term horizon should start with large cap funds or balanced funds. 

The most preferred way for the salaried is Systematic Investment Plan better known as SIP. We will speak about it in detail in a following post.

Term Insurance: An important part of financial literacy is life cover. However due to misspelling and ignorance, it is not emphasized enough. Term Insurance is the protection that all income generators should take to cover for their lives in case of any uncertainties. It is a must for the Corporate Mom who makes a crucial contribution to household income.

In addition to above, working moms can also invest a small portion in Gold ETFs or if keen, then dabble in Equities with a long term view.

In the end, all we can say is investments don’t take as much time as we think. Moms and all women should consciously take steps towards investing. Remember Earning for Spending is not the deal, Earning for Growing is.

Are you over paying your home loan?

Moms you might just say, “Now that’s a rhetorical question. Of course we are over paying”. The pinch of Home Loans is so hard that it does appear as an over-paid debt. Especially because home loans are so long in duration compared to other loans like Car, Education or Personal loan. By simple estimates also, you pay double the loan amount back to your lender. This blog however is not the usual expensive home loan rant.

We recently visited the bank, for our KYC updation for a 2 year old home loan. It actually was a 2 minute process which required our signatures as per some newly introduced e-KYC rules. The loan account being least of our favourites, was hardly ever looked into, which led us to enquire about the on going rates. To our happy surprise, we WERE OVERPAYING INDEED. The rate of interest had reduced by a whole 1%. We found that bank does not automatically apply the reduced rate (which we were told at the time of availing the loan) and it required our instructions to do so.

Another learning that came out was that the rate reduction is not without a charge. We had to give a SWITCH OVER fee. To clarify the point, the current 9.55% rate was brought down to a new rate of 8.65% for a year. Post a year, if the rate of interest continued on a downward spiral then we could ask the bank to bring it down again.

The switch over fee was not transparent though, and we couldn’t ascertain the basis of calculation. But we could definitely see benefits of paying it one time and bringing down EMI for our balance 198 EMIs, saving a couple of lacs in the long term.

So as we sat back in the evening thinking through the day and reading some advice about managing a home loan, here came our take-outs:

1. Keep an eye on news about RBI’s Monetary Policy review meetings and even other news about interest rate changes.

2. Check the rate of interest with your lender periodically (atleast once a year)

3. If you are being charged for switching to lower rates, negotiate with the lender to pay as less as possible.

4. Use your bonuses, windfalls, big payments to pay the loan back. The earlier you are debt-free the better.

5. If you are foreclosing a part of your loan, ask the bank to reduce the tenure instead of the EMI.

6.  Two way tax benefits should be used – First, the interest component of the loan is eligible for deduction upto Rs. 2 lacs under section 24. Second, the principal repayment allows you deduction of upto Rs. 1.5 lacs under section 80C. To know more about tax benefits on home loans, you can see: https://cleartax.in/s/home-loan-tax-benefit

​Tax saving options for Women

Taxes are inevitable whether you are employed, partner in family business or an entrepreneur. Tax planning is important to ensure your earnings don’t suffer from heavy tax outgo-s, last minute rush or late filing penalties.
Moms, today we are sharing options for availing tax deductions so you make use of right options well in time and save up on taxes.
Tax Deduction
Section 80C of Income Tax Act allows for a deduction of up to Rs. 1,50,000 for investing in tax saving options. Two most known ones are Public Provident Fund and Employee Provident Fund. Let’s look at some other options.

5 year deposits: If you don’t want to take too much risk, invest in 5 year deposits with any bank or post office. You can’t get deductions upto Rs. 1.5 lacs under Section 80C. 
Sukanya Samridhi Yojana: For girl child below 10 years, SSY can be taken where you can deposit upto Rs. 1.5 lacs each year for a fixed return of 9.2%. The best part is both interest and maturity amounts come tax free. The lock in period is 11 years for this scheme till your daughter reaches 21 years of age.
ELSS: Equity Linked Savings Scheme give you tax exemption while giving you attractive returns. The fund is managed by professional managers so you don’t have to worry about market movements, ELSS have a lock in of 3 years.
Life Insurance: If you are a primary or an equal earner in the family, then you must consider getting a life cover through life insurance. The government allows for a max amount of Rs. 1.5 lakhs to be deducted annually for tax benefits.
National Pension Scheme: Working women who would like to save for retirement should consider NPS. There are 3 distinct profiles for you to map your risk profile: Equity, Corporate bonds, Government securities. The exemption you get for NPS cannot exceed Rs. 1.5 lacs annually.
Home Loan: Home loan repayments can get you tax deductions and in 2 ways. There is deduction allowed upto Rs. 1.5 lakhs in principle amount and upto Rs. 2 lakhs in interest repayment. You must make use of this even if you are a co-worker along with your husband.
Also find from local registrar office, if there is a stamp duty concession for women buyers, which is usually around 1-2%.

There could be a marginal rebate of .05% on home loans for women which should be checked with the lending bank.

Be a smart mom in saving your tax because Money Saved is Money Earned.